Directors of companies are entitled to any information they reasonably request about the company of which they are a director. It is therefore normal for a director to possess a great deal of confidential information about the company. Directors are also bound to high standards of conduct with regard to their behaviour towards their company.
In a recent case, the High Court ruled that an ex-director’s obligations were sufficiently strong as regards the company of which he had formerly been a director to prevent him from revealing information about his former company to his new employer, in spite of the fact that it is notoriously difficult to enforce restraint of competition clauses in employee contracts.
The ex-director had been on the verge of revealing confidential information about one of his former company’s products after he was ordered by the court to sell his shares to his former co-director when a court action was brought against him for taking actions which were prejudicial to the company.
The two men argued about the price to be paid for the shares and, when agreement could not be reached, the ex-director decided to help his new employer in an action against his former firm over a patent dispute.
The High Court granted his former employer a ‘perpetual injunction’, banning the ex-director from disclosing specified information regarding the product.
Court Embargo on Revealing Confidential Information
The Court’s decision was reached after evidence was heard that the ex-director had shown a ‘blatant disregard’ for the rights of his former co-director and was willing to disclose information damaging to his former employer regardless of whether doing so could breach a temporary restraint order issued previously. Whilst the circumstances are somewhat exceptional, the principle that a director owes a duty of good faith to his company is well established.
If you are engaged in a dispute with members of your board of directors or fear that your company may be damaged by the activity of an employee, director or former director, contact us for advice.
If you are engaged in a dispute with members of your board of directors or fear that your company may be damaged by the activity of an employee, director or former director, contact us for advice.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
